During liver injury, bone marrow-derived mesenchymal stem cells (MSCs) can Migrate and differentiate into hepatocytes. Hepatic stellate cell (SC) activation is a pivotal event in the development of liver fibrosis. Therefore, we hypothesized that SCs may play an important role in regulating MSC proliferation and differentiation through the paracrine signaling pathway. We demonstrate that MSCs and SCs both express hedgehog (Hh) pathway components, including its ligands, receptors, and target genes. Transwell co-cultures of SCs and MSCs showed that the SCs produced sonic hedgehog (Shh), which enhanced the proliferation and differentiation of MSCs. These findings demonstrate that SCs indirectly modulate the activity of MSCs in vitro via the Hh pathway, and provide a plausible explanation for the mechanisms of transplanted MSCs in the treatment of liver fibrosis. (C) 2008 Elsevier Inc. All rights reserved.